The Atlanta City Council voted Monday to close a loophole that enabled apartment developers to use government subsidies to build luxury apartments in Atlanta without reserving any units for lower income residents, in violation of the city’s practice.

The Development Authority of Fulton County provided Fairfield with $55 million for an apartment complex along Memorial Drive, near Grant Park and Turner Field. The photo shows a Fairfield development in California. Credit: fairfieldresidential.com

Atlanta’s current policy requires developers to reserve 10 percent of units for lower income residents in projects where developers get subsidies from Invest Atlanta, the city’s development arm.

Development authorities in Fulton and DeKalb counties have no such requirements. Atlanta has no ability to change the policies of these county authorities.

As a result, developers have shopped for deals that allow all units to be market rate. They have received subsidies from a county authority for a project in Atlanta. The consequences have been significant.

In the past several years, about 8,500 apartment units have been built with subsidies provided by the Development Authority of Fulton County. Of these, 30 units have been set aside for lower income residents, according to Dawn Luke, senior vice president of community development at Invest Atlanta.

Here are three examples, taken from the minutes of the Development Authority of Fulton County:

$55 million to a subsidiary of Fairfield Residential to help fund construction of an apartment building along Memorial Drive, near Turner Field and Grant Park.

The Development Authority of Fulton County provided Hanover with $96.5 million for an apartment complex, with retail, located in Midtown along 10 Street, between Spring and West Peachtree streets. Credit: atlantaintownpaper.com

$81.1 million to Post Properties to help fund construction of an apartment building next to the Federal Reserve, in Midtown.

$96.5 million for an apartment complex, with retail, located in Midtown along 10 Street, between Spring and West Peachtree streets.

Luke said the typical monthly rent for a subsidized apartment is $1,700. Most units are studio to one or two bedrooms. They are not intended for families.

The council approved legislation that advocates think will terminate this work-around.

Atlanta Councilmember Andre Dickens, who sponsored the legislation, conceded during debate Monday that Atlanta cannot change the policies of the other development authorities.

What Atlanta can do is refuse to allow the apartments built with subsidies to be occupied if the developer does not comply with the city code, Dickens said. Atlanta simply will not issue a certificate of occupancy until the developer complies with the ordinance, Dickens said.

The Fulton County Development Authority provided $81.1 million to help fund construction of an apartment building next to the Federal Reserve, in Midtown. Credit: postproperties.com

Effective July 1, all apartment projects that receive a government subsidy must comply with the new ordinance.

The ordinance requires that 15 percent of all homes built in a subsidized project to be affordable to those who earn 80 percent of the area median income. The AMI in metro Atlanta is $38,200 a year for one person. The ordinance stipulates that a tenant in a subsidized apartment pay not more than 30 percent of gross income in rent.

Invest Atlanta President and CEO Eloisa Klementich told the council Monday that the agency supports the project. Reed, as mayor, chairs the board that oversees Invest Atlanta.

“We are dedicated to affordable,” Klementich said. “This really will help us level the playing field with all developers. This allows us to bring affordability to all parts of the city.”

Andre Dickens

Critics of the ordinance include a small developer and the Georgia and Atlanta apartment associations. They spoke last week, when the measure was discussed at the council’s Community Development Committee.

Yvonne Dragon, who owns a two-year-old development company, urged caution.

Dragon said Atlanta already is a difficult place to work, because of regulations. Consequently, she’s building homes for millennials near the airport. She asked that the AMI be lowered.

Penny Round, of the Georgia and Atlanta apartment associations, said the proposal omits some good ideas that were discussed – such as devising a policy that would cover existing housing. She hadn’t expected the proposal to move so quickly toward adoption.

“While this is a first step … I’m not sure if it’s a misstep or a first step,” Round said “We talked about a lot of ideas that no one in the nation in working on. Not just new housing, but existing properties. … My concern is the way this is written, it’s challenging to get affordable housing in [a development] and get something built in the city of Atlanta. I’m not sure if it’s going to work.”

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

It is good you covered this. However, at an earlier committee meeting numerous folks spoke out in favor of require more meaningful levels of affordable housing. The real need is for units that are affordable for people earning below 50% of the area median income (AMI). And the figure you cite is a bit misleading because many units are one bedroom or two bedroom units that are designed for 2-4 person housholds, so the AMI is considerably higher (over $50,000). There is really no argument to give developers what amounts to millions of dollars in property tax abatements (through the Lease Purchase Bond programs of Invest Atlanta and Fulton County Dev Authority) without some commensurate level of affordable housing. Lowering rents for 15% of units to be affordable to folks at 80% AMI will reduce the rent roll pretty marginally, and this loss of rent will be FAR LESS than the benefit the developers get for the tax break. Is it better than the existing 10% requirement of Invest Atlanta. Yes. Is is fair to the City. No. This still a windfall for developers. They should have required 20% of units set aside for affordable housing, with at least 10% affordable to families with incomes below 50% AMI. The developers say they bring tax revenue to the city. Well, let them do it without subsidy if they don’t want to provide real affordability. We don’t need to subsidize luxury rentals.Report